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The Pakistan Credit Rating Agency Limited
Press Release

Date
18-Nov-21

Analyst
Iram Shahzadi
iram.shahzadi@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Ahmed Fine Weaving Limited

Rating Type Entity
Current
(18-Nov-21)
Previous
(18-Nov-20)
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings of Ahmed Fine Weaving Limited (Ahmed Fine Weaving) reflect its improving business profile emanating from rising revenues and profitability. The Company is a family-owned public unlisted company with weaving capacity of 270 Air Jet looms where BMR has been recently completed. The ownership rests with the family of Mr. Ashar Fazal including his mother and children. The current governance framework can be further strengthened. The Company’s management is cognizant of the textile industry’s volatility and has planned up gradation of machinery to remain competitive. The ratings reflect sustained business profile over the years where recently improvement has been recorded in revenues. The Company’s topline increased by 15% YoY, during FY21, to stand at PKR 6.6bln; a resultant of higher capacity utilization accompanied with better prices. Sales mix represents contribution from both local and export market; FY21 majorly tilted towards exports 67% of total revenue (FY20: 57%). This trend has been generally witnessed in the textile industry during last year post-pandemic tenure. During the period, margins have improved along with a sizable increase in net profitability. Ratings also incorporate sound financial risk manifested by significant improvement in working capital and coverage. Going forward, the planned CAPEX is expected to bring in efficiency gains and improved margins.
Textile exports of the country recorded a double-digit increase of ~23% for FY21 to stand at USD 15.4bln as compared to USD 12.5bln in FY20. The same trend continued and exports recorded 27% growth to stand at USD 4.4bln in first-quarter ending September 2021. The growth is attributable to an increase in demand for textile products internationally, led by good recovery around the globe post-pandemic. Going forward, the textile sector’s outlook is expected to stay stable in the medium term where the demand for textile products is expected to increase.
The ratings are dependent on the management’s ability to uphold the entity’s performance trend. Meanwhile, maintaining strong margins and coverages to fulfill financial obligations will remain critical. Improvement in the governance framework is considered important.

About the Entity
Ahmed Fine Weaving was incorporated on July 6th, 2012 as a public unlisted company. In January 2016, the weaving segment of the Company was de-merged from Ahmed Fine Textile Mills into Ahmed Fine Weaving Limited. This separation was done through a scheme of arrangements. All assets, liabilities, agreements, arrangements, and other matters relating to the weaving business were transferred to and vested in the Company. The Company currently operates with two weaving units with a total of 270 Air Jet looms. Yousaf Adil, Chartered Accountants, is the external auditor of the Company. The auditor has expressed an unqualified opinion on the financial statements ending Jun 30, 2021.

The ownership of Ahmed Fine Weaving rests with the family of Mr. Ashar Fazal including his mother and children. The Company’s board of directors comprises three members. Two members belong to the sponsoring family, while one member is an executive director. Sponsoring family dominance and the absence of independent oversight indicates room for improvement in the governance framework of the Company. Mr. Ashar Fazal - the Chairman of the board, is also the CEO of the Company.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.